If every advisor takes for granted that a term life policy can pay benefits via periodic payments, the same can’t be said of beneficiaries.
In fact, many beneficiaries associate the payout as a lump sum, a phrase sometimes referred to as the “lump sum lottery.”
Hence the need to re-position term life, which is precisely what Allstate has done with Monthly Income Term. It is just one of a few creative new insurance products hitting the market recently.
“Many families live paycheck to paycheck, so this is relatable to them,” said Brian Stricker, senior vice president of life and retirement products at Allstate.
Allstate sells through its extensive network of career agents.
A policy that pays $5,000 a month in income for many years is more intuitive than $1 million upon death of the policyholder, he said.
Lottery winners can relate to a lump sum, but for most families a windfall doesn’t frame the benefit in terms of how much monthly income the policy will provide.
Monthly Income Term offers a lump-sum option, but that’s not what people are really looking for, Stricker said.
“We wanted to get away from the lump sum,” he said. The income story was “so compelling,” that it “drove everything on this product,” he said.
The first-month payout can be increased by between $10,000 and $25,000 to help families with “immediate needs,” such as funeral costs. Any initial payment that exceeds $10,000 comes at an extra cost, Stricker said.
Monthly Income Term comes with a conversion feature to switch to permanent life, just like any other term plan.
The monthly product can be bought for 10- or 20-year terms and structured to deliver payments over a period of three, five or 10 years, the company said.
Monthly Income Term joins Allstate’s underwritten TrueFit term and simplified issue Basic Term, the company said.
Allstate had $874.5 million of U.S. life insurance sales last year, up 9 percent from the year before, according to data from the National Association of Insurance Commissioners.
Term life premiums rose 1 percent in the second quarter compared to the year-ago period and the number of term policies were flat, industry tracker LIMRA reported.
CB Life Launches First Fee-based MYGA
Colorado Bankers Life has launched its first fee-based multiyear guaranteed annuity (MYGA), a market segment that has seen big sales increases recently with the rise in interest rates.
CB Life’s CBLA-4 is a four-year fixed annuity offering an interest rate of 4 percent, the company said in a news release.
The fee-based product, developed in conjunction with DPL Financial Partners, is a designed to be sold through registered investment advisors (RIA). DPL is an insurance network that markets commission-free insurance products to RIAs.
“The fee-only market is growing and DPL offers a great platform to reach RIAs and their clients with our competitive four-year, tax-deferred product,” said Chad Burns, CB Life’s senior vice president of national accounts, in a news release.
MYGAs compete with bank products like certificates of deposit and when interest rates rise, as they are doing now, fixed annuity product sales often improve.
CBLA-4 joins the company’s CBLA 3, 5 and 7 MYGAs, which guarantee interest rates for 3, 5 and 7 years, respectively. CBLA 3, 5 and 7, which are commission-based, carry withdrawal charges, according to CB Life.
MYGA sales jumped in the second quarter in the wake of two Federal Reserve rate increases in the first half of the year. The Fed raised rates again last month.
Second-quarter MYGA sales rose 27 percent to $10 billion over the year-ago quarter and 23 percent over the first quarter, according to market tracker Wink’s Sales & Market Report.
Fixed annuities have traditionally been sold via commission, but more fee-based fixed annuities are coming onto the market specifically to appeal to RIAs, one of the fastest-growing advisor segments.
RIAs have traditionally been skittish of selling commission-based products because of the perceived fiduciary risk.
Last week, Nationwide Advisory Solutions began selling a new single-premium immediate annuity, or SPIA, also designed to be sold by the company’s 5,500 RIAs and fee-based advisors.
Because there are no commissions built into the design of a fee-based annuity, the money that would otherwise go to the agent remains in the product.
Depending on fee structures, however, commission-based products are the better deal, according to insurance companies.
Whether earning a commission or a fee, advisors have more choices than ever even if fee-based annuity sales still represent a mere sliver of overall annuity sales, which last year hit $204 billion.
Overall annuity sales in the first half were $111 billion, up 5 percent from the year-ago period, LIMRA Secure Retirement Institute reported.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]